How to invest £125 a month in UK shares to target a £39,039 annual passive income

Need to reside off passive income as a substitute of working a job? I wouldn’t thoughts. In any case, it might free a lot of additional time that I may use elsewhere.

To realize this, I’m attempting to construct a inventory portfolio that accommodates high-quality dividend shares.

In accordance to the ONS, the present median wage in the UK for full-time workers is £39,039. Due to this fact, it is smart to create a technique that targets incomes this income yearly.

Let’s see the way it’s potential for an investor to substitute their job with a passive income machine.  

The passive income target

Now, let’s assume an investor was focusing on a dividend yield of 5% in a diversified portfolio. If aiming to substitute the median UK wage, that portfolio would want to be valued at £780,780.

Nevertheless, I’m undecided a lot of you studying this have that a lot spare change to hand.

However I’m right here to inform you some excellent news… you don’t want that a lot to begin. An investor may as a substitute intention to obtain this over time.

With a far more modest quantity of £20,000 to begin with (which continues to be a giant sum of spare money) and a small contribution of £125 a month, an investor may make £780,780 inside 32 years.

That is assuming that each dividends and shares in the portfolio rise by 5% a 12 months, and that the dividends are reinvested.

I admire that among the extra income generated from the portfolio can be eroded away by inflation over that point. Buyers must also observe that dividends aren’t assured.

However by investing in a shares and shares ISA, the dividends earned in the portfolio can be tax-free income. Whereas, after all, you may have to pay tax in your employment income.

Please observe that tax therapy relies on the person circumstances of every shopper and could also be topic to change in future. The content material in this text is offered for data functions solely. It isn’t meant to be, neither does it represent, any type of tax recommendation. Readers are accountable for finishing up their very own due diligence and for acquiring skilled recommendation earlier than making any funding selections.

Let’s now have a look at a UK share that would assist an investor target this.

A juicy dividend yield!

ITV (LSE:ITV) shares at the moment sport a pretty dividend yield of 6.2%. This might be very best for buyers to think about shopping for for his or her portfolio, because it’s above the 5% target used in my instance above.

The broadcaster faces some severe points. Most notable is the competitors it faces from streaming platforms. The best way individuals are consuming TV is altering. Increasingly more are watching platforms akin to Netflix, as a substitute of conventional broadcasters.

Due to this pessimism, the agency’s shares have struggled, pushing their valuation into cut price territory. Proper now, it sports activities a ahead price-to-earnings (P/E) ratio of 9.

Nevertheless, whereas I acknowledge this threat, I believe it’s a bit overblown. The corporate stays a staple in many households.

Moreover, its personal streaming platform, ITVX, has been quietly impressing in the streaming world. In 2025, complete streaming hours elevated 16% to 2.3bn. Month-to-month energetic customers additionally elevated 12% to 16.5m.

Whereas ITV does face severe points, this offers causes to be optimistic for the corporate’s future.

Mixed with a excessive dividend yield and low cost valuation, I believe buyers ought to think about shopping for ITV shares right now.